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Income Tax Appellate Tribunal, “A” Bench, Mumbai
Before: Shri Shamim Yahya (AM) & Shri Kuldip Singh (JM)
IN THE INCOME TAX APPELLATE TRIBUNAL “A” Bench, Mumbai Before Shri Shamim Yahya (AM) & Shri Kuldip Singh (JM)
I.T.A. No.781/Mum/2021 (Assessment Year 2010-11) Vs. CIT-IT-4 Ajaykumar Satyapal Singh 1305/A, Panchratna, 16 Aaykar Bhawan Queens Road M.K.Road Opera House Mumbai-400 020 Mumbai-400 004
PAN : AJYPS0939D (Appellant) (Respondent) Shri Haresh P.Shah Assessee by Department by Ms. Shailaja Rai Date of Hearing 07.12.2021 Date of Pronouncement 21.01.2022
O R D E R Per Shamim Yahya (AM) :-
This appeal by the assessee is directed against the order of the Commissioner
of Income Tax(IT)-4, dated 23.03.2021 and pertains to the assessment year (A.Y.)
2010-11.
Grounds of appeal read as under:- (1) On the facts and circumstances and in law the impugned revision proceeding u/s. 263 was barred under the provisions of section 263(2) of the Act as the first show - cause notice was issued on 10th July. 2020 which in view of the reassessment order dated 12/10/2017 was due to be issued latest by 31st March, 2020. (2) On the facts & circumstances & in law the learned CIT- IT, Mumbai-4 [CIT] erred in passing the impugned revision order without appreciating that the original reassessment proceeding was taken place on the very same facts and therefore, the reassessment was neither erroneous nor prejudicial to the interest of revenue within the meaning of section 263 of the Act. (3) On the facts & circumstances it is humbly prayed that the impugned revision order u/s. 263 of the Act may be quashed & oblige.
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Brief facts of the case leading to the issue of notice u/s. 263 as noted by the Ld.CIT reads as under:-
It was noticed by the AO that the assessee had not filed its return of income for AY 2010-11 whereas as per the information available with the department during the Financial Year 2009-10, the assessee had sold an immovable property for a consideration of Rs 36,00,000/-. Therefore, the case of the assessee was re-opened by the AO u/s. 147 of the IT Act, after recording reasons and notice u/s 148 of the IT Act was issued to the assesse on 31.03.2017. In response to the said notice assessee filed its return of income for AY 2011-12 declaring net taxable income at Rs 35,44,960/- including Short Term Capital Gain of Rs.5,40,860/-. While calculating the Short Term Capital Gain on the sale of flat on 22.06.2009, the assessee has taken the sale consideration at Rs.36 lakhs and purchase cost including stamp duty charge at Rs 30,59,140/-. However, as per information available on record it has been observed that the market value of this flat on which stamp duty has been Paid is Rs 47,74,000/-. Therefore, as per provisions of section 50C(1) of the IT Act this amount of Rs 47,74,000/- was required to be taken as the full value of the consideration received as a result of such transfer. Therefore, the Short Term Capital Gain should have been calculated by the assessee at Rs 47,74,000/- (-) cost of acquisition in FY 2007-08 i.e Rs 30.59.140/- = Rs 17.24.860/- instead of the Short Term Capital Gain of Rs 5,40,860/- shown by the assessee in the return of income. 3. During the course of assessment proceedings, the AO never examined this issue of application of section 50C nor any query was raised with reference to the same. The AO simply accepted the net taxable income declared by the assessee in its return in response to notice u/s 148 and also accepted calculation of Short Term Capital Gains at Rs 5,40,860/-. The AO should have assessed the Short Term Capital Gains at Rs 17,14,860/- instead of Rs 5,40,860/- as declared by the assessee. Therefore, the assessment order of the AO was not as per provisions of section 50C of the IT Act.
Before issuing the notice Ld.CIT also noted that due to the COVID pandemic time barring dates for completion of 263 and other proceedings were extended from 31.03.2020 to 31.03.2021 by referring to various taxation laws and amendment act. In response to the notice, assessee objected to the delay in notice and further without prejudice submitted that in the reason for reopening issue of 50C was not raised. Further, it was submitted that matter may be referred to DVO for valuation. The above said objection duly noted by the Ld.CIT reads as under:-
3 ITA No.781/Mum/2021
Without prejudice to the above objecting to the issue of notice u/s 263(2), assessee has always cooperated with the department and wish to submit following grounds: 1. Copy of letter from Assessing Officer stating the reasons for reopening this case for AY 2010-11, copy is enclosed this issue of u/s 50C for sale of property was not raised in the reasons for reopening. In this case, the Assessing officer had no reasons to believe that income has escaped applying section 50C of the Act This reason is not mentioned in the letter for reason to reopen the case u/s 147. 1. In view of this, the proceedings u/s 148 are void so far as it relates to issue of provisions under section 50C. 2. Assessee further requests your honor to refer the valuation of sale consideration of flat under dispute to departmental valuer. This flat was under" distress sale and property market was under recession. Being Non-Resident, Assessee could not find proper buyer as per stamp duty valuation. In view of all above grounds, we request you to drop proceedings under section 263 of the Act."
But, Ld.CIT was not convinced, he repeated his observation that time limit for issue of notice u/s. 263 stood duly extended. As regards, the merits of the objection, he held as under:-
As stated in earlier paras that during the F.Y 2009-10 (wrongly mentioned as FY 2010-11 in the notice u/s 263 of the I.T Act), the assessee has sold an immovable property for consideration of Rs 36 Lakhs. The assessee had not filed its return of income and it was only in response to the notice u/s 148 of the I.T Act that the assessee filed its return of income for AY 2010-11 declaring net taxable income at Rs.35,44, 960/- which included Short Term Capital Gain of Rs 5,40,860/-. The Short Term Capital Gain on the sale of flat on 22.06.2009 has been calculated by reducing the purchase cost of Rs 30,59,140/- from sale consideration of Rs 36 Lakhs. However, as per information available on record, the market value of this flat on which stamp duty has been paid is Rs 47,74,000/-. Therefore, as per provisions of section 50C(1) of the I.T.Act, the amount of Rs. 47,74,000/- was required to be taken as the full value of consideration received as a result of such transfer. Therefore, Short Term Capital Gain should have been calculated at Rs. 17,14,860/- instead of Rs. 5,40,860/- as declared by the assessee. Therefore the assessment order of the AO was not as per provisions of section 50C of the I.T.Act. 6. Thereafter, Ld.CIT observed that failure to make proper enquiries to arrive at the correct and complete facts and to apply the correct law makes assessment order erroneous and prejudicial to the interest of the revenue. In this regard, Ld.CIT
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referred to several case laws. He also referred to the newly inserted Explanation 2 of section 263 w.e.f 01.06.2015, for the proposition that the order shall be deemed to be erroneous insofar as prejudicial to the interest of the revenue, if in the opinion of the CIT, the order is passed allowing any claim without enquiry into the claim.
Finally, Ld.CIT directed the AO to make fresh assessment as under:-
In the instant case, the issue is also not of adopting a possible view out of more than one view possible (by the Assessing Officer) but here the Assessing Officer has failed to make a view and passively accepted the contention put forward by the assesses as is evident from the assessment records. Thus, in the facts and circumstances of the case, the then Assessing Officer has failed to gather the complete facts of the case and to correctly apply the law while making the assessment and has resultantly passed an erroneous order which is also prejudicial to the interest of revenue. In view of the facts and legal positions stated above it is clear that the Short Term Capital Gains of the assessee should have been worked out at Rs 17,14,860/- instead of Rs 5,40,860/- as declared by the assessee and thus there is Short assessment of Short Term Capital Gain to the tune of Rs 11,74,000/-. Therefore, assessment order u.s 143(3) r.w.s. 147 of the IT Act dated 12.10.2017 passed by the AO for AY 2010- 11 is erroneous as well as prejudicial to the interest of revenue. Therefore, this assessment order is cancelled with the directions to the AO to make a fresh assessment in accordance with law keeping in view the above observations after allowing opportunity of being heard to the assessee.
Against the above order, assessee is in appeal before us. 9. We have heard both the parties and perused the records. Ld. Counsel of the assessee reiterated his submissions made before the Ld.CIT. He referred to the copy of letter submitted to Ld.CIT, wherein on merits assessee has submitted as under:-
Without prejudice to the above objecting to the issue of notice u/s. 263(2), Assessee has always cooperated with the department & wish to submit following grounds:- 1) Copy of letter from Assessing officer stating the reasons for reopening this case for A.Y. 2010-11, copy is enclosed, this issue of u/s. 50C for sale of property was not raised in the reasons for Reopening.
5 ITA No.781/Mum/2021
In this case, the Assessing officer had no reasons to believe that income has escaped applying section 50C of the Act. This reason is not mentioned in the letter for reason to reopen the case u/s. 147. 2) In view of this, the Proceedings u/s. 148 are void so far as it relates to issue of Provisions under section 50C. 3) Alternatively, Assessee further requests your honor to refer the valuation of Sale Consideration of flat under dispute to departmental valuer. This flat Was under distress sale & property market was under recession. Moreover, occupation Certificate (O.C.) was not given to the Society at the time of Sale of Property. Therefore, this property could not fetch proper value. The occupation certificate was issued on 11 July 2011 the copy of which is enclosed. If O.C. is not given by Municipal Corporation, the value of property is reduced as per trend of property market in Mumbai. In view of all above grounds, we request you to drop the proceedings under section 263 of the Act.
Per contra, Ld. DR relied upon the orders of the Ld.CIT. Upon careful consideration, we note that the first objection of the assessee that notice u/s. 263 is beyond time is not sustainable in view of the fact that due to COVID, pandemic time barring dates were extended. This has been duly dealt with by the Ld.CIT in his order. Ld. Counsel of the assessee could not cogently rebut that time barring dates stood extended in view of the pandemic as observed by Ld.CIT. Hence, this objection by the assessee stands dismissed.
As regards, the merits of the case the undisputed fact is that assessee has not filed return of income. The assessment was reopened. In notice of reopening one of the reason mentioned was that assessee has purchased an immovable property valued more than Rs. 30 lacs. In assessment order, the AO accepted the assessees computation without invoking the provision of section 50C. Ld. Counsel of the assessees has submitted that issue of 50C was not mentioned in the reason for reopening, hence in this assessment order, AO has not dealt with the issue 50C. This submission is not at all sustainable. Section 50C of the I.T.Act clearly provides that in case of transfer of capital assets being land or building if the value adopted by the assessee is less than the value adopted by the stamp valuation authority difference
6 ITA No.781/Mum/2021 should be added as income of the assessee u/s. 50C of the Act. There is no provision in the act permitting the AO to deviate from that. Hence, the AO not invoking the provision of section 50C, certainly makes the order of AO being erroneous. Hence, invocation of the provision of section 263 of the Ld.CIT is quiet correct. However, we note that section 50C duly provides that ,if the assessee is not satisfied with the valuation done by Stamp valuation authority, he can object to the same to the AO and in that case AO shall refer this matter to the DVO. This aspect was mentioned by the assessee before the Ld.CIT. We note that Ld.CIT has directed the AO to examine the issue afresh keeping his observations in the earlier part of the order. We note that when the matter is being remitted to the file of AO to decide afresh as per law, all the provisions of the law has to be taken into account by the AO, which includes all the provisions of section 50C in the statute books.
It is further noted that the Ld.CIT has referred to amendment brought in Explanation 2 of section 263. However, we note that it was inserted w.e.f. 01.06.2015 and it has been held by courts that amendment is prospective. However, this is not germane in the context of fact that AO has not invoked the provision of section 50C and has passed an erroneous order prejudicial to the interest of the revenue.
In this view of the matter, we find that no prejudice would be caused to the assessee by the order of the Ld.CIT, wherein, he has directed the AO to make fresh assessment in accordance with law. Needless to add, AO shall take into account, the provisions of law contained section 50C and give the assessee proper opportunity of being heard. In this view of the matter, in our considered opinion, there is no reason to quash the order passed u/s. 263. Hence, in light of our above discussions, we uphold the order of CIT.
7 ITA No.781/Mum/2021
In the result, this appeal filed by the assessee stand dismissed.
Pronounced in the open court on 21.01.2022.
Sd/- Sd/- (KULDIP SINGH) (SHAMIM YAHYA) JUDICIAL MEMBER ACCOUNTANT MEMBER Mumbai; Dated : 21 /01/2022 Thirumalesh, Sr.PS Copy of the Order forwarded to : The Appellant 1. The Respondent 2. The CIT(A) 3. CIT 4. DR, ITAT, Mumbai 5. Guard File. BY ORDER, //True Copy// (Assistant Registrar) ITAT, Mumbai